Saturday, 22 September 2007

My posting has been light recently. There was a week in Mexico and then a lot of time on the road for the paying part of my job. Four years ago when one of the regular employment law bloggers hit a cold patch it made for a substantial impact, but that is no longer the case.

While many of the "old-timers" like George Lenard, Ross Runkel, Michael Fitzgibbonand the crew at Lynch, Ryan whose Workers Comp' Insider just turned four last week, are still going strong, there fortunately has been a whole new group adding their collective insights. Just to mention a few recent articles from those relatively new, or probably more accurately, new to me (and my apologies to those I miss, although feel free to let me know):

When I finally get around to updating my blog format and have a better blogroll, I can include all these and the many others that are now getting closer to being old timers as well, that have joined the fun.

Friday, 21 September 2007

Wage Wars is a great title for the October 1st cover story for Business Week, highlighting the surge of collective actions under the venerable wage and hour law, the Fair Labor Standards Act of 1938. The article is a good, not to mention sobering, overview of how these suits are playing out.

What is not mentioned is one of the reasons that the high settlements are being reached -- the structural process. Unlike other class actions governed by Rule 23, which have a relatively high burden for initial class certification, the courts have set a very low standard for the initial quasi-certification for collective actions under § 216(b) of the FLSA, which is sending out notice to potential class members.

Given that low standard, it is not uncommon for an employer to end up facing a class of hundreds or thousands, with very little evidence having been presented and frequently without any sort of hearing. You know it's not a good thing for employers when you read articles indicating that notice should be sought as early as possible in cases for the "settlement leverage" that it provides.

Although there is a procedure for "de-certifying" the class, it comes after the end of a long and potentially very expensive discovery period involving the "class", so there is a great pressure to settle cases rather than slug it out.

Ironically, the Supreme Court recognized the dangers of forcing the settlement of "marginal cases" because of the costs of discovery in anti-trust cases in Bell Atlantic v. Twomblydecided just this past May.

In Twombly, the Court was affirming dismissal of a case based on the pleadings, and in explaining its rationale noted, "it is one thing to be cautious before dismissing an antitrust complaint in advance of discovery .... but quite another to forget that proceeding to antitrust discovery can be expensive." An apt description of an FLSA collective action as well.

Justice Souter (the author of the 7-2 decision) went on to perfectly describe the danger of launching the discovery juggernaut when very little is required:

It is no answer to say that a claim just shy of a plausible entitlement to relief can, if groundless, be weeded out early in the discovery process through "careful case management," post at 4, given the common lament that the success of judicial supervision in checking discovery abuse has been on the modest side. See, e.g., Easterbrook, Discovery as Abuse, 69 B. U. L. Rev. 635, 638 (1989) ("Judges can do little about impositional discovery when parties control the legal claims to be presented and conduct the discovery themselves"). And it is self-evident that the problem of discovery abuse cannot be solved by "careful scrutiny of evidence at the summary judgment stage," much less "lucid instructions to juries," post, at 4; the threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings. (emphasis added).

Another problem is that the first notice is, at least in the circuits that have decided the issue so far, including the 5th Circuit, a non-appealable decision.

In many ways it is a perfect storm -- the current standard is set low and it is difficult to get cases in a position where an appellate court is going to write on changing that standard.

The roots of the easy notice standard lies in another 7-2 Supreme Court decision in an age discrimination case involving a class action based on a 1,200 person lay off by Hoffman La Roche. In a very short opinion, the Court approved the district court's facilitation of notice to the group.

Only Justice Scalia, joined by Chief Justice Rehnquist dissented:

There is more than a little historical irony in the Court's decision today. "Stirring up litigation" was once exclusively the occupation of disreputable lawyers, roundly condemned by this and all American courts. See, e. g., Peck v. Heurich, 167 U.S. 624, 629-630 (1897); Grinnell v. Railroad Company, 103 U.S. 739, 744 (1881). But in the age of the "case managing" judicial bureaucracy, our perceptions have changed. Seeking out and notifying sleeping potential plaintiffs yields such economies of scale that what was once demeaned as a drain on judicial resources is now praised as a cutting-edge tool of efficient judicial administration. Perhaps it is. But that does not justify our taking it in hand when Congress has not authorized it. Even less does it justify our rush to abandon (not only without compulsion but without invitation) what the Court deprecatingly calls the courts' "passive" role in determining which claims come before them, but which I regard as one of the natural components of a system in which courts are not inquisitors of justice but arbiters of adversarial claims.

One wonders if the Supreme Court really meant to start us down the path outlined in the BW article. Given the views expressed in Twombly, it seems highly unlikely that it did, or would do so again. The question now is how to get off that path.

Monday, 17 September 2007

"We're cautiously optimistic that we can be neutral on it when it goes to the House floor,"

employers who thought that legislation which would prohibit discrimination on the basis of sexual orientation would be a long time coming, should start shortening their time horizon. The bill in question is known as the Employment Non-Discrimination or ENDA (H.R. 2015).

There are still some negotiations going on -- primarily over the specifics of the protection for transgendered employees and the scope of the religious employer exemption. This would seem a certainty for 2009 if it doesn't make it before then.

Friday, 7 September 2007

Today, a 5th Circuit panel issued the second substantive decision in the case of Palasota v. Haggar Clothing Co. (5th Cir. 9/7/07). Its first decision almost 4 years to the day earlier, overturned the trial court's granting of a judgment notwithstanding the verdict.

On remand after the first decision, the trial court entered a judgment in favor of Palasota for

$840,000 in economic damages,

a like amount as liquidated damages,

ordered reinstatement,

with interim pay of $14,500 a month until he was offered a position,

and awarded a lump sum of back pay in the amount of $525,000 for the period of time from the end of trial to the date of the second judgment

The Court found that the issue of liability was foreclosed by its first decision and that there was sufficient evidence (detailed in the opinion) to support a willful finding, and the accompanying $840,000 liquidated damage award.

In what appears to be a throw-away comment and without any citation, the Court added this unhelpful language:

Haggar’s unsuccessful efforts to have Palasota release it from ADEA claims upon his termination tended to show that Haggar had knowingly violated the ADEA or recklessly disregarded whether its conduct toward Palasota was prohibited by the statute.

Given that requesting a release is a standard practice when a severance package is being given, such evidence standing alone is unlikely to be sufficient to sustain a finding of willfulness. It's the sort of thing that if the Court is asked to revisit its opinion should be eliminated as being unnecessary, but not necessary harmless, dicta.

Given the size of the judgment and that liability was already decided, the opinion is the rare case where the Court talks at length about damages and remedies. Among the holdings --

affirmed the jury's finding of compensatory damages as supported by the evidence, even though it took into account the effect of improper discriminatory actions occurring before the limitations period;

discussed the shifting burdens of proof on the issue of mitigation, outlining the burden on the defendant when challenging an adverse jury finding;

reversed the court's order on reinstatement, finding that it would not be the same position he had before, would either displace or harm the income of existing employees and that there likely existed ill will among the parties that made reinstatement not a satisfactory remedy;

sent the $525,000 front pay award back to the trial court to re-consider, with a strong hint that perhaps the liquidated damages would negate the need for such an award since it might well result in a windfall for Palasota and "ADEA damages are not meant to be punitive."

Although they may not be intended to be "punitive" given that the trial court did not believe that discrimination was proved, my guess is it would be hard to convince the employer of that.